Parallel Currencies in SAP Part II: Supporting Local Legal Reporting

Below is a snippet from one of hundreds of articles available to ERPtips subscribers. If you would like a complimentary copy of the full article, please email

Mark.Downs@ERPtips.com(include the title of the article in your email)

To subscribe to ERPtips, go to www.ERPtips.com/Subscribe.asp.

ERPtips Journal is published by Klee Associates, Inc. ERPtips University provides both public and onsite training for SAP clients.

For more about ERPtips University, including the current schedule, click here:www.ERPtips.com/WorkshopSchedule.asp

Parallel Currencies in SAP Part II: Supporting Local Legal Reporting

Editor`s Note: A world apart? Not these days when globalization seems more the rule than theexception. If you`re not currently involved in multi-national manufacturing, the odds are that youwill be. When that time arrives you`ll be glad you had a “heads up” on financial reporting issues and solutions, from someone who`s done it. Dimitris Langas laid the foundation for supporting parallel currencies in Part I of his series, including detailed steps for configuring and assigning a new currency code. In Part II of the series he wraps up the process with an overview of the required Actual Costing-Material Ledger configuration, as well as suggestions on handling issues that arise.

Click here to read this Snippet

SAPtips

Page

�

SA

Pti

ps J

ourn

alJu

ne/ J

uly 20

08 V

olum

e VI I

ssue 3

SAPtips.com SAPtips © 2008 Klee Associates, Inc.

By selecting currency type 40-Hard currency, we get the displayed financial statements in the parallel currency ZSKK (Figure 14).

Closing this section, let’s consider the slightly more complex situation where many subsidiaries from dif-ferent countries also have a similar requirement; i.e., they also need to valuate their financial transactions and generate their financial statements using different exchange rates than the ones you receive centrally from your financial data provider. I have come across this request from customers operating companies in Poland, Slovakia, and the Baltic States (Lithuania, Latvia, and Estonia). Some South American countries, due to their high inflation rates, may also have this requirement (see OSS Note 110550 “Parallel currencies Colombia, Mexico, Venezuela”).

Usage of parallel currencies for more than one country-subsidiary therefore will not be such an unusual request for a multinational company operating in numerous countries around the world. In such a situation, you will have not only one but many parallel currencies in your system, one for every country where a subsidiary exists that has a need for such functionality. The table in Figure 15 lists some examples.

Even more in this case, with multiple parallel curren-cies, it is necessary to adopt this solution; otherwise it would be impossible to accommodate the local legal requirements. Without parallel currencies, each sub-sidiary would need to update its local currency in its own required way, which of course would affect not only its own local business but all postings between that subsidiary’s company code and any other internal or external business partner. The additional parallel currencies, along with the segregation of exchange rate maintenance, are the only way to allow for local legal financial reporting without any negative impact to the Group Finance’ s exchange rate-related processes and requirements.

Before closing this article, it is worth looking at some of the questions that usually come up relating to the setup and use of parallel currencies.

Miscellaneous Questions That May Come UpThe first question I usually get asked when discuss-ing the parallel currency functionality with a customer is how many parallel currencies can we set up in the system? For those that have been reading through this article carefully, the answer should be obvious by now: you can have up to two parallel currencies (“index-based” and “hard” currency) in addition to the primary company code currency. In other words, the FI system can store a total of up to three parallel currency valu-ations; an FI document can accommodate up to four different currencies including the transaction currency.

Another question that may come up sometimes is if it is possible to use these parallel currency figures for internal-management reporting via the Controlling

4On Financials / FI

Figure 14: Financial Statements Using the Local National Bank’s Exchange Rates (Transaction F.01)

Country OfficialCurrency ParallelCurrency

Slovakia SKK ZSKK

Poland PLN ZPLN

Latvia LVL ZLVL

Lithuania LTL ZLTL

Mexico MXN ZMXN

Figure 15: Example List of Subsidiaries That Use a Parallel Currency

SAPtips

Page

�

SA

Pti

ps J

ourn

alJu

ne/ J

uly 20

08 V

olum

e VI I

ssue 3

SAPtips.com SAPtips © 2008 Klee Associates, Inc.

(CO) modules, like for example Profit Center Account-ing (PCA) and CO-Profitability Analysis (CO-PA). The simple answer has to be “no”; parallel currencies are a very helpful functionality allowing you to accom-modate local legal financial reporting requirements, but it is not meant to be used for internal-management reporting purposes. Even though it is possible to create your own parallel currency reporting using the report painter/writer functionality, you should aim to restrict these activities to externally required fiscal reporting. As I have shown, it is not very difficult to set this function-ality up for business processes directly affecting your legal financial statements, because it is based on SAP standard FI customizing, but the same does not apply for SAP’s Controlling modules.

With many implementations of the New General Ledger (New G/L) currently under way or in planning, the question will surely come up if and how the New G/L affects parallel currencies or the other way around. The answer is again very simple: the parallel currency functionality has remained basically unaffected in the New G/L, so there is nothing to worry about! You can implement parallel currencies irrespective of whether you use the classic G/L or the New G/L. You might also refer to OSS Note 1070629 “FAQs: New General Ledger Migration”.

Finally, a delicate topic is often the issue of activating and de-activating parallel currencies. As I mentioned earlier, parallel currencies should ideally be set up from the productive go-live of a new company code. If you have missed that chance and are considering setting up this functionality later, then you should consult OSS Note 39919 “Introducing parallel currencies in FI”. I would, however, strongly recommend introducing paral-lel currencies only at a Fiscal Year change. Also, please take into account that if you are using the Material Ledger module, the exercise will be extra tricky (ML is not mentioned at all in OSS Note 39919).

De-activating parallel currencies, on the other hand, is a little bit more straightforward, but again it should be attempted at a Fiscal Year change. If you are consider-ing de-activating a parallel currency, please also consult OSS Note 89531 “Deactivating parallel currencies in FI”.

ConclusionConsidering that the parallel currency functionality has been available for ages (actually, it has been available since SAP R/3 release 2.2!), it is amazing how little attention it has received in the literature and how many misconceptions still exist about it. In this two-install-ment article, I tried to provide a detailed account of the functionality, its purpose and uses, go through all the relevant configuration steps in the various SAP finan-cials modules, and provide answers to some of the ques-tions that often come up relating to it.

Parallel currencies can accommodate very well the local legal requirements that exist in some countries to use locally provided exchange rates. Whether the request is to valuate only your assets and liabilities in the local National Bank’s exchange rates, or there is a legal requirement to produce your complete financial state-ments in those rates, you can set up and use a parallel currency to give the local finance community the flex-ibility and reporting that is required without the need to worry at all about your Group Finance processes.

As I have shown in this article, it is worth it to take the time to implement parallel currencies if you have sub-sidiaries in countries where such requirements exist. It is a relatively simple and straightforward functionality to implement, and it will certainly pay off!

Dimitris Langas is an independent SAP consultant specializing in the Financials modules. He has partici-pated in numerous SAP implementations across many European countries and has worked with customers of almost any size, industry sector, and nationality in the EU. Working with business software since 1992 and with SAP products since 1998, he has undertaken many technical, functional, and management roles in a large number of IT projects. His current interests include financial process automation, accommodating financial reporting standards and local legal requirements on SAP ERP, and using SAP software and tools to turn transactional data and figures into valuable manage-ment information and insight. You may contact the author at SAPtips.Authors@ERPtips.com. Be sure to mention the author’s name and/or the article title. ≈

4On Financials / FI

The parallel currency

functionality has remained

basically unaffected in the

New G/L, so there is nothing

to worry about!